This is a rush transcript from "Your World With Neil Cavuto," November 12, 2008. This copy may not be in its final form and may be updated.


HENRY PAULSON, U.S. TREASURY SECRETARY: ... apologize for — for changing an approach or a strategy when the facts change.


NEIL CAVUTO, HOST: All right, so no apologies from the treasury secretary for changing the rules in the middle of the game. He said, we had to.

Why is Dick Armey, then, not surprised? The former House majority leader joins me right now.

Mr. Majority Leader, it is out of control.

DICK ARMEY, FORMER REPUBLICAN HOUSE MAJORITY LEADER: Well, let me first thank you for your prior just. I think we are both dumber for having heard him.

Video: Watch Neil's interview with former Republican House Majority Leader Dick Armey


CAVUTO: No, no, he's a good man. I'm telling you, by the way, that is the way the world is going. And both parties are signing the checks.

ARMEY: Well, I'm sure he is.


CAVUTO: But go ahead.

CAVUTO: Look what happened.

All of a sudden, two or three weeks ago — I forget what it was — all of a sudden, the secretary of the treasury and the president of the United States came running out of the barn, saying, the place is burning down. It's all falling apart.

It's no wonder the American people had a lack of confidence. They have got the two most important financial officers of this country saying the place is going to rack and ruin.

This — this whole — everything that we're looking at right now is as much a product of their panic and that of Congress, all these lemmings that run off the cliff with our money. And now what do they do? They have got the $700 billion. They're rolling around, and the market is sitting here, trying to say, will these people ever land? And, if they do, where will they go? What will they do?

CAVUTO: So, what would your alternative be? I have heard from many who just say, let them rip. That is the rest you pay.

What do you say?

ARMEY: Well, again, I think the risk you pay is, these people — you have a legacy of bad public policy.

Let it, the market, work that out. Ten years ago, or thereabouts, it was the whole dot-com shakedown. Remember how we all got nervous about that? What, one or two years, it worked itself out. The electronics industry is stronger for it.

Detroit is sitting there whining because it can't compete with China. Their problem is not competing with China. Their problem is competing with Alabama. There are automobile plants that are prospering and jobs that are durable in Alabama, for one big reason. They haven't overloaded themselves with...


CAVUTO: But, Dick, there are many in your party, led by the president of the United States, who say there is something to being too big to fail. There is something to being too internationally entangled to let die on the vine.


CAVUTO: And hence the rescue of some of these big banks and brokerages that has now led to the tin cup routine we see going on now.

What do you make of that?

ARMEY: I just don't — first of all, I just don't agree with that.

The fact of the matter is, there was so much bad stuff out there that was a pattern of bad habits, only the market can figure it out. Look, this treasury secretary got $700 billion. He was supposed to buy all these troubled assets. He says now he can't do it because we can't figure out what it means, what it's worth, how to price it.

Well, the market prices things. That is what market does. So, he says, well, I can't do that. It is too hard. Government is not capable processing the information. Let's jump over and start looking at student loans and car loans and see if we can figure out what the information flow there is there.

They will be just as baffled by that. So, they're running around with a pocket full of money and...


CAVUTO: Well, that's what they're expanding to. That's what they're — you have a Republican treasury secretary in a Republican administration saying this.

ARMEY: Right.

CAVUTO: You have a Democratic administration coming in, saying, kind of do all this on steroids.


ARMEY: And we have these piling deficits and debt.

Can you, in this environment, Republican or Democrat now, avoid the inevitability of taxes going up to pay for all of this?

ARMEY: No, you have to. Sooner or later, you have to, and plus the fact and you have got right now the hue and cry that is coming out of the Democrat Party is, we — if we are going to bail it out, we have to own it.

Now, I mean, the fundamental problems that you have in terms of the political decisions that will be foisted on firms if they are run by members of Congress appointing their people to the boards and making political decisions.

The fact of the matter, this is a bad, ugly scene that can only be resolved by letting the market give the lumps to the losers out there that have earned the lumps.

CAVUTO: All right, well, we are not at that point, Dick Armey. But thank you very much. Good seeing you.

ARMEY: Thank you.

CAVUTO: All right.


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